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Fear Performance Marketing at your Peril

A wise man once said that “you always fear what you don’t understand” and, despite being over a decade since its initial conception, people still fear performance marketing.

The wise man in question was Carmine Falcone in Batman Begins, and for a brutal leader of Gotham’s criminal underworld, his philosophy certainly rings true.

I don’t think there are obvious comparisons to performance marketing and Batman, although it is nice to think that our industry is the anti-hero striving for universal approval, but his simple ethos has been resonating loudly throughout the performance channel recently.

The prime example of this is the EU e-Privacy Directive; a misguided, ill informed piece of legislation that was thrown together by those that fear and misunderstand how the digital industry works.

The repercussions of this directive, had it been as stringent as first interpreted, could have crushed a multi-billion pound industry overnight by making legitimate cookie based tracking on the internet a heinous crime.

This is arguably further emphasised in the continual misunderstanding of performance marketing in the national press. The recent witch hunt by the Daily Mail for one entrepreneurial publisher was so savage that their business lost over 40 partners in the space of one week. The publisher’s response was that it was like an “atom bomb being dropped on a mouse”.

Admittedly, there were genuine concerns with this type of affiliation, however the entire article was written with an uneducated view on a business model that had won many admirers for its innovation.

So how do we, as an industry, go about safeguarding publishers in order to harvest innovation and creativity?

The IAB has long been trying to raise the awareness of performance marketing to a wider audience through events, blogs, seminars, best practice guides and the implementation of the new councils, but the penetration is still minimal.

Many of the networks have equally tried to engage with senior stakeholders in agencies and advertisers, and where successful; businesses have thrived and stretched the boundaries of performance marketing. However these “affiliate huggers” represent a small percentage of the overall industry and, by in large, the channel is still treated like a poor man’s cousin feeding off the scraps of the online table.

In some instances publishers haven’t even been afforded the privilege of representation alongside more established marketing channels. It seems more and more that our channel is the one that misses out or gets punished for being more transparent and flexible.

There are still advertisers, who haven’t integrated affiliate tracking on their mobile sites, leaving publishers to drive free traffic because the channel is considered are a lower priority!

Let’s take the New vs Existing customer chestnut as an example. This is a KPI that many advertisers have visibility on but not many channels can track and report on this in real time like publishers can. Furthermore, not many channels can apply different commission rates to these KPI’s in order to influence new customer acquisition and pay out on the value of the individual customer.

Millions of pounds get pumped into CPC and CPM activity through Search and Display respectively but I have never heard of an advertiser paying Google different commissions for a new and existing customer.

Why? Because the model does not allow that kind of up-front flexibility.

It therefore seems logical that advertisers should maximise a channel like performance marketing that offers such flexibility, but unfortunately this rarely seems the case. The money an advertiser saves by lowering commissions on existing customers is rarely reinvested back into the channel that made the initial saving.

I can understand that Search, and in particular Google, is considerably influential in consumer purchasing behaviour but a fully optimised affiliate programme can offer significant revenue and, thanks to its unique flexibility, unparalleled returns on investment.

Ok, so this raises the whole incrementality conundrum again (the industry’s in vogue topic) and to be honest I have no new theories on this. There will always be division and debate over incrementality and until we have a clear view on what is going on in the consumer’s mind when purchasing a product we are merely acting on assumptions.

Due to the last click model it is unlikely that publishers will ever slip away from the incrementality spotlight but if advertiser’s start to move away from the channel their competitors will gladly step in and reap the rewards.

The current situation reminds me of a quote Roy Keane once said where he lambasted a section of the Manchester United fans as the “prawn sandwich” brigade.

His tirade was a deliberate attack on the fans that attended their home games and enjoyed the luxuries of corporate hospitality whilst failing to fully understand the game of football. Keane felt that certain sections of the crowd had not been vocal enough in their support, and at times were too quick to criticise minor mistakes. Sound familiar?

I could write paragraph after paragraph of why this channel represents a more valued proposition than the likes of Social, Re-targeting, Search and Display (all of which you can do on a CPA basis through publisher partnerships) but publishers would still be a home match that people turned up to and never fully understood.

It’s this lack of knowledge and understanding that is holding the industry back. Most people are unaware that the performance marketing industry has moved on from the “Wild West” days and has evolved into a professional, multifaceted era.

The line we once represented in the digital industry is so far away now we can’t even see the line; the line is a dot to us.

It’s time for us, collectively as a channel, to stop advertisers from just dipping a toe in the water. We need to drag them in, kicking and screaming if necessary, and submerse them in the wonderful, colourful world of performance marketing; a world that can incorporate attribution modelling, intelligent commissions, sophisticated data analysis, multichannel purchasing, unparalleled reactive marketing, phenomenal reach and a high return of investment.

Great article written with a great deal of passion. I'd be really interested to understand what affiliates/publishers/partners think about this article.

A large part of the reason that channels such as search and display get considerable recognition is that search engines and display networks have traditionally spent a lot of time, energy and money on ingratiating themselves with agencies and brands.

My feeling is that within the affiliate space, it has always suited us to hide our lights under the bushel to an extent. I think the reason for this is that when affiliates have innovated previously, these methods have been adopted by the brand themselves. Therefore it has always been in peoples interests to maintain a little bit of mystery.

Agree that it's time for brands and agencies to increase sophistication and recognition of the performance channel, and I think the ones that are currently embracing it are the ones who get the most from it.

Great article Nick, plenty of passion which is another example of what differentiates affiliate managers from PPC/Social/Display managers. The affiliate channel is transparent and every penny accountable, which is such a blessing yet is the sole reason for scrutiny.

As an affiliate I find it amazing that some brands feel this way. I have worked with affiliate programs in the gaming industry where there is an acceptance amongst senior management that they need affiliates but a large aspect of distrust and also a whimsical attitude towards affiliates and the work they do and the commission they earn.

There is a huge list of gaming brands that have been deemed to be rogue by affiliates/publishers and players with the merchants and operators holding the power to reject, withhold and sometimes hide earnings.

Affiliates are an online sales force essentially working for free (until they receive any commission) they should be encouraged and worked closely with and there are many good brands working with their networks and network managers out there and long may it continue the rest will catch up one day!

Whilst I agree with the sentiment of what you are saying, I think it would be remiss not to acknowledge the fact that a lot of brands feel this way about affiliates because of some shady, unethical and some downright illegal activity that has gone in within the channel before.

As Nick points out, plenty within the industry and specifically the IAB Affiliate Council, have put in a lot of effort to self-regulate the market and increase transparency. During my own tenure as Chair of the IAB AMC we instigated the voucher code guidelines that have improved the perception of these sites and the value they add. Before these guidelines were brought in there were some decidedly nefarious things occurring.

Getting our own house in order is essential before we castigate others for failing to see the value. Whilst the landscape has undoubtedly improved, there is still work to be done, which must be carried out hand in hand with the promotion of the industry that many are carrying out.

Thanks for reading this guys and I'm glad it is raising a debate, which is exactly what I had hoped for.

I would be inclined to say that "our house" is in good shape and the IAB practices, that Matt described previously, were the foundations of this change.

However, I think more recently, networks have invested heavily in compliance and resource in order to control certain aspects within the performance market and we are starting to build a sturdy wall around these already established roots.

I would like to think that advertisers would see beyond our “nefarious” past and take advantage of a more controlled, transparent form of online marketing – arguably more so than the likes of Display, where advertisers still buy inventory from blind networks! Where is the control in that?!

I don’t think we are crystal clear by any means but we are perhaps a “B” Grade at the moment; commercially strong and a good specimen, but not in perfect condition and may contains some nicks and scratches.

I wouldn’t want this debate to move away from its central theme though, which is that the majority of advertiser’s still treat performance marketing as the poor man’s cousin and we are still – even after a decade – second best to channels that are nowhere near as flexible or diverse.

Nick, this is a great and extremely insightful article. As an AM, it always strikes how difficult it is to sometimes have to convince a merchant to take that necessary step in order to expand the program. Sometimes throwing numbers and the clear room for opportunity right into the air for everyone to see is not enough for a right decision to be made.

I agree with Matt in that a lot of the reasoning for this coming from big brands is the result of the negative stereotype that unfortunately exists within the industry coming from both the merchant and affiliate side. I admire the IAB for attempting to do what they do because without transparency... as with everything in the world... we will not progress and climb as an industry if we don't take a genuine stand for what we believe in. I actually wrote an article about this in Feedfront Issue 18.

Thanks again, Nick.

-Olga

over 5 years ago

Kier

I think this piece would have benefited from more substance and less emotion.

In particular your points around comparing affiliates to search I find very unconvincing:

"I have never heard of an advertiser paying Google different commissions for a new and existing customer"

As you know no one (outside of GAN and some limited other avenues) pays Google on a commission basis. More to the point keyword bids can be adjusted in real time (unlike affiliate commission which typically requires a notice period and can often provoke an angry backlash) and any decent analytics will be able to show the percentage of new vs returning users to allow optimisation on this basis or any number of other metrics. Searches on brand terms which are often returning users will also generally come in much cheaper due to a higher quality score.

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